With quarterly results soon arriving from both firms, two reports from Stifel and Cowen arrived finding Nike’s growth accelerating largely at the expense of Adidas.
Stifel’s findings, led by Jim Duffy, were based on February footwear checks by his team. Over 100 stores in the U.S. market (Dick’s, Academy, Foot Locker, Finish Line, Champs, and Hibbett Sports) were called to assess the popularity of athletic footwear styles for boys and girls in the key February selling season.
According to Stifel’s checks, Nike was referenced as the most popular brand in 71 percent of calls, up from 65 percent a year ago and 67 percent in Stifel’s August 2018 back to school (BTS) survey. For men’s styles, Nike was mentioned as popular on 75 percent of calls versus 66 percent the prior year and 70 percent during the 2018 BTS check. For women’s styles, Nike was mentioned as popular in 67 percent of checks, flat against the year-ago timeframe and up from 64 percent in the 2018 BTS check.
Duffy noted that Nike appears to be doubling down on women’s in 2019, as noted by the launch of the “Show them what crazy can do” campaign and remarks by executives. On its last quarterly conference call, Mark Parker, Nike’s CEO, said, “We think 2019 is going to be a true tipping point for women in sport, with more participation, more coverage, and overall, more energy.”
Wrote Duffy, “We will be watching NIKE women’s popularity closely in future checks.”
Overall, newness and breadth of offering contributed to Nike’s favorable showing in checks. Duffy wrote, “Relative to prior years, NIKE style popularity showcased greater product breadth and a skewed towards new and premium offerings (the React platform and multiple Air Max offerings), though still strong relevance for the historical library (Jordan retros and white on white Air Force 1 with both genders).”
Among key styles, Air Max platform mentions improved to 47 percent of checks from 42 percent last August. The Air Max 270 style was found to be resonating with both men and women and was the second most mentioned style (referenced in 26 percent of checks). The balance of references were for the Air Max 90’s, 95’s, 97’s and the recently introduced 720’s.
A Jordan shoe was referenced as most popular in 26 percent of checks, down from 30 percent of calls in prior-year checks but Jordan’s popularity with women increased. Showcasing the success of the new models, the Free or Huarache were missing from the top-5 styles for the first time in the prior four checks.
For Adidas, Ultraboost and NMD silhouettes both showed year-over-year mentions, but references to Adidas as popular slipped to 22 percent of checks from 27 percent in the prior year and 26 percent during the BTS period. Checks showed Adidas style popularity skews towards women and reference of Adidas styles other than Ultraboost and NMD declined.
Other insights from Stifel’s February checks include Vans increasing in total mentions to 12 percent from 8 percent a year ago and Under Armour mentions coming in flat. Both Fila and Champion received some call outs after hearing none the prior year.
One underlying trend Duffy noted was that a broader range of styles are resonating with consumers as the top-5 styles references again saw lower overall penetration than in prior checks. He believes that gives an advantage to online sites that can stock a more extensive range than physical stores. Duffy added, “We believe this further perpetuates channel shift to digital and encourages consumers to purchase more frequently directly from the brands.”
Stifel has a “buy” rating on Nike with a target price of $84.80. Shares of Nike closed Monday up $1.02 to $85.82.
At Cowen, John Kernan wrote in a note that his team’s store checks and Google trend data suggest recent success for Adidas with both the Ultraboost ’19 and Yeezy franchises in Q418 and Q119, but he likewise believes Nike’s share gains are accelerating.
“Our checks with consultants and industry participants yield a fairly consensus view that Nike continues to see significant momentum and high sell-throughs across Air Max 270, VaporMax Flyknit, Jordan and other Air franchises while Adidas segmentation needs to evolve within certain franchises as high end boutique partners are concerned over the pace of promotions in mid-tier channels.”
Kernan wrote in a note that the overall athletic footwear market has become “very ‘drop’ driven” with Instagram and strength in sneaker resale markets driving perception . He believes Nike is benefiting from smart management of its “massive archive of product” to drive full-price sell-throughs.
On Adidas, Kernan believes Vans, Nike and Puma are gaining share globally from the Adidas Originals business. NMD, having reached its five-year anniversary, is seeing increased promotions in North America as distribution has extended beyond the traditional mall-based channels. Wrote Kernan, “We think Eric Liedtke and team are ready to step up innovation, as Prophere, Deerupt, Solar Boost, POD and Pure Boost look promotional and less competitive to us.”
Kernan believes the Ultra Boost ’19 has “tremendous potential” in both performance and lifestyle although it’s being held back by significant Ultra Boost 4.0 inventory in the marketplace. He further noted that while Yeezy 350 V2, 700 and 700 V2 are all showing healthy sell-throughs online, “it will be critical to keep this franchise at full price and not fully push too heavily into N. American wholesale partners.”
Pluses for Adidas, according to Kernan, include the promotion in December of Kate Ridley to SVP, Brand, to support Zion Armstrong, president, Adidas North America. Kernan also suspects Yeezy will make “a large scale push” into basketball during 2019 to put some pressure on Nike and Puma. He pointed to buzz that Adidas is expected to make a strong push to sign Zion Williamson, Duke’s star forward and expected top pick in the 2019 NBA Draft.
Cowen has an “outperform” rating on both Nike and Adidas. The firm raised its price target on Nike to $92. Its price target on Adidas is €225.00. On the Frankfurt Stock Exchange, shares of Adidas closed Monday at €212.60, up €2.00.
Adidas’ earnings are due March 13 while Nike’s are set to come out on March 21.
Image courtesy Nike